In today’s briefing:
- HK Connect SOUTHBOUND Flows (To 28 Feb 2025); Big Volumes, HUGE Net Buys on Blue Chips, Tech-Y Names
- Sparx Launches Another Offensively Underpriced Takeover at a Fat Premium – SNT (6319) +94%
- Box Trades Explained: How Traders Execute Near Risk-Free Arbitrage in Hong Kong’s Options Market
- Merger Arb Mondays (03 Mar) – Seven & I, Makino, Aeon Delight, Tonami, Tam Jai, Vesync, Insignia
- MIXUE IPO Trading – Strong Demand, Set to Break the Tea Chain Jinx
- The Only Way to Know if a Company Are Improving in Real Terms Is if It Is Creating Value
- Weekly News & Views – Feb 28, 2025
HK Connect SOUTHBOUND Flows (To 28 Feb 2025); Big Volumes, HUGE Net Buys on Blue Chips, Tech-Y Names
- Gross SOUTHBOUND volumes cleared HK$800bn for the second week in a row. NET buying by SOUTHBOUND was HK$75bn which was perhaps a new record.
- Notable again is the HUGE back-and-forth. If HK$865bn traded and SOUTHBOUND “only” bought HK$75bn, HK$395bn was round-tripped for short-term purposes.
- Last week I flipped to short Alibaba Group Holding (9988 HK). Sentiment may worsen and there’s lots to sell later this week. Staying short Alibaba for now.
Sparx Launches Another Offensively Underpriced Takeover at a Fat Premium – SNT (6319) +94%
- Sparx on Friday announced a Tender Offer at 0.55x book and an EV of less than inventory (<20% of revenue) for Snt Corp (6319 JP) – another metal monozukuri company.
- Last year they did it on IJTT Co., Ltd. (7315 JP). That one got bumped. This one could too, but cross-holders own nearly 60%.
- This kind of company has skill-sets which may be portable but the product line is tied to old Japan. The takeover
Box Trades Explained: How Traders Execute Near Risk-Free Arbitrage in Hong Kong’s Options Market
- Box trades are gaining popularity on the Hong Kong Stock Exchange. These arbitrage strategies exploit price discrepancies in options markets for near risk-free profits.
- Long box trades involve simultaneously buying bull call spreads and bear put spreads with identical strikes and expiration dates, creating a fixed payoff regardless of the underlying asset’s price movement.
- Box trades require careful execution consideration of spreads, commissions, margins, and fees, with risks primarily in execution and operations rather than market exposure.
Merger Arb Mondays (03 Mar) – Seven & I, Makino, Aeon Delight, Tonami, Tam Jai, Vesync, Insignia
- We summarise the latest spreads and newsflow of merger arb situations we cover across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
- Highest spreads: Tonami Holdings (9070 JP), Seven & I Holdings (3382 JP), Aeon Delight (9787 JP), Smart Share Global (EM US), Insignia Financial (IFL AU), Tam Jai International (2217 HK).
- Lowest spreads: Millennium & Copthorne Hotels Nz (MCK NZ), Shibaura Electronics (6957 JP), Makino Milling Machine Co (6135 JP), Domain Holdings Australia (DHG AU), Proto Corp (4298 JP).
MIXUE IPO Trading – Strong Demand, Set to Break the Tea Chain Jinx
- Mixue Group (2097 HK) raised around US$450m in its Hong Kong IPO.
- MIXUE Group (MIXUE) is a freshly-made drinks company providing affordable products to consumers, including freshly-made fruit drinks, tea, ice cream and coffee, typically priced at around one USD per item.
- We have covered various aspects of the deal in our previous notes. In this note, we will talk about the trading dynamics.
The Only Way to Know if a Company Are Improving in Real Terms Is if It Is Creating Value
- In Japan, where there’s strong peer pressure, people are reluctant to do something before someone else does, and tend to follow the trend once the majority of formality is known.
- When numbers are specified and rules are established, Japanese companies tend to scramble to match the numbers. Thus, many companies have not voluntarily improved their board practices.
- There’re companies that only have good board practices but aren’t generating value .Therefore, we should focus on whether they are doing actions that create value in addition to board practices.
Weekly News & Views – Feb 28, 2025
- Vista Energy – Mercado Libre – Telecom Argentina – Suzano – Cemex
- The LatAm Aggregate Index expanded by 14 bps to 331 bps in the week ending Friday, February 28, 2025.
- U.S. Treasuries saw significant declines. The 10-year yield fell 22 bps to 4.21%, while the 5-year yield declined 25 bps to 4.02%.
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